State ex rel. Friend v. Dist. Court of Fifth Judicial Dist. in & for Ward Cnty.

• Decision Date: 18 August 1927
• Docket Number: No. 5390.,5390.
• Citation: 55 N.D. 641,215 N.W. 87
• Parties: STATE ex rel. FRIEND et al. v. DISTRICT COURT OF FIFTH JUDICIAL DIST. IN AND FOR WARD COUNTY et al.
• Court: North Dakota Supreme Court

55 N.D. 641

215 N.W. 87

STATE ex rel.FRIEND et al.

v.DISTRICT COURT OF FIFTH JUDICIAL DIST. IN AND FOR WARD COUNTY et al.

No. 5390.

Supreme Court of North Dakota.

Aug. 18, 1927.

Syllabus by the Court.

Where a district court of this state has assumed jurisdiction over the estate of an alleged insolvent debtor, and thereafter proceedings have been commenced in the District Court of the United States under the National Bankruptcy Law (11 USCA) to have such debtor declared a bankrupt, and while such proceedings are pending in the District Court of the United States, the state district court continues to adjudicate claims, authorize expenditures, and otherwise administer said estate, the Supreme Court of this state, under the powers conferred upon it under the provisions of section 86 of the Constitution, will intervene to stay the proceedings in the district court of this state, pending the determination of the bankruptcy proceedings, in order to avoid possible conflict of jurisdiction.

Original application by the State, on the relation of Eugene Friend and another, copartners as Friend & Marks, and others for a restraining order, to be directed to the District Court of the Fifth Judicial District and John C. Lowe as Judge thereof, and another. Application granted.Paul Campbell, of Minot, for petitioners.

G. W. Twiford and F. J. Funke, both of Minot, for respondents.

BURR, J.

The petitioners come into this court asking for an order directing the respondents to desist from further proceedings and actions in the case of Milton Ochs, etc., v. Gerding-Beckman, Inc., a corporation, until the question of the bankruptcy of the said Gerding-Beckman, Inc., be determined by the District Court of the United States for the District of North Dakota. The application made to this court is one strand of a tangled mass of litigation pending in the district court of Ward county. We do not undertake to determine the merits of the other controversies which have arisen, but confine ourselves to that phase which suggests a possible conflict between the District Court of the United States for the District of North Dakota and the district court of Ward county.

It appears that on November 24, 1926, the respondent Milton Ochs commenced action in the district court of Ward county against Gordon Clothing Company, a corporation, defendant, with garnishment proceedings against Gerding-Beckman, Inc., a corporation. The garnishee failed to make a disclosure within the time provided by statute and thereafter applied to be relieved from the judgment which was entered against it by default. Judgment was rendered against the Gordon Clothing Company by default, and thereafter proceedings were commenced to have these default judgments set aside. Delay ensued and dispute arose between various stockholders in the Gerding-Beckman, Inc., corporation. A creditors' committee was appointed for the latter corporation, and the control of the assets of such corporation and its business turned over to the board of directors of this committee, and thereafter some of these stockholders, claiming to act for the Gerding-Beckman, Inc., corporation, stipulated to dismiss all proceedings to set aside the default judgments, so execution could be issued against Gordon Clothing Company and the garnishee. Thereafter the defendant Milton Ochs, a foreign corporation, commenced an action against the Gerding-Beckman, Inc., corporation to have its property sequestered and a receiver appointed and its assets distributed to its creditors. The district court of Ward county appointed such receiver, and the receiver took possession of all the property and was empowered to settle and compound claims, operate the business, sell and dispose of the assets, and distribute the property among the creditors. Thereafter and within four months the petitioners filed a petition in bankruptcy in the District Court of the United States for the District of North Dakota asking that the said Gerding-Beckman, Inc., corporation be adjudged a bankrupt, and such proceedings are now pending in the federal court and are undetermined. Two answers were filed on behalf of the Gerding-Beckman, Inc., corporation by the rival and antagonistic factions in the federal court in the bankruptcy proceedings, one admitting the bankruptcy and the other denying it. The petitioners applied to the District Court of the United States for an injunction restraining the defendant Ochs and the said receiver from proceeding further in selling and disposing of the assets and property, and thereafter stipulation was entered into to the effect “that there will be no distribution or other disposition of any of the properties of said sale until the determination of a trustee herein, if any there be”; and thereupon the injunction was dissolved. The petitioners further allege that the respondents are proceeding with the receivership, have issued notice to creditors to file claims, and are proceeding to pass upon and allow all claims for expenses and fees incurred in the administration of said estate, and that the said court is continuing to exercise jurisdiction over the property of the Gerding-Beckman, Inc., corporation, under the receivership. This court issued an order directed to the respondents requiring them to show cause why an order should not be made requiring the district court of Ward county to stay any and all proceedings in said matter until the question of the bankruptcy of Gerding-Beckman, Inc., corporation be determined by the District Court of the United States and restraining them from taking any further action or proceeding in the matter now pending in the district court of Ward county.

Each respondent filed a return, and these returns admit that the district court of Ward county has issued and caused to be published a notice to all of the creditors of the Gerding-Beckman, Inc., corporation to the effect that the receiver has filed a report showing his receipts from the sale of property of the said corporation in the sum of over $10,000, showing expenses, including his fees and the allowance to his attorney, and notified said creditors that the court would “pass upon and allow any and all claims for expenses and fees incurred in the administration of said estate, consider and determine what should be...